Passage Bio, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter ended September 30, 2022. The filing was signed November 10, 2022. Passage Bio is a clinical-stage genetic medicines company developing gene therapies for central nervous system disorders; it had no approved products and no product revenue.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development | $15.4 million | $26.6 million | $68.4 million | $84.7 million |
| Acquired in-process R&D | $1.5 million | $5.5 million | $3.0 million | $7.0 million |
| General and administrative | $10.7 million | $15.0 million | $38.8 million | $42.9 million |
| Net loss | $26.7 million | $46.9 million | $109.1 million | $134.2 million |
| Net loss per share, basic and diluted | $0.49 | $0.87 | $2.01 | $2.53 |
| Net cash used in operating activities | Not separately stated | Not separately stated | $94.2 million | $96.1 million |
- At September 30, 2022, cash and cash equivalents were $62.6 million and marketable securities were $151.2 million, totaling $213.8 million. Current assets were $222.5 million and current liabilities were $21.6 million.
- Total assets were $270.1 million; total liabilities were $45.7 million, including $27.3 million of operating lease liabilities. The filing reports no credit facility or committed external capital source.
- Cash and cash equivalents declined $66.4 million during the first nine months. Investing activities provided $28.6 million, principally reflecting net sales and maturities of marketable securities; financing activities used $0.8 million.
- The company reported an accumulated deficit of $465.3 million. Profit margins are not meaningful given the absence of product revenue and continuing operating losses.
Changes versus the prior comparable period
- Q3 net loss narrowed by $20.2 million year over year; nine-month net loss narrowed by $25.2 million. Operating losses also declined, primarily as research and development and G&A spending decreased.
- Management attributed lower R&D expense mainly to the timing of clinical manufacturing, lower personnel and share-based compensation, and lower Penn-related costs. G&A reductions were primarily associated with the March 2022 workforce reduction.
- Operating cash use was broadly similar year over year, down $1.9 million for the nine-month period. The prior-year period included $165.8 million of net proceeds from a common-stock offering; there was no comparable offering in 2022.
- Adoption of lease accounting in January 2022 added operating lease right-of-use assets and liabilities; this was an accounting presentation change, not new cash proceeds.
Outlook, operating developments and risks
- Liquidity outlook: Management expected existing cash, cash equivalents and marketable securities to fund operating and capital expenditure needs into the first half of 2025. The notes also state that resources were expected to cover forecast needs for at least twelve months from issuance. These are estimates dependent on assumptions and program spending.
- Management expected R&D and G&A expenses to remain consistent or decrease in the near term following workforce reductions and program prioritization. This was not formal revenue or earnings guidance.
- In March 2022, the company announced a 13% workforce reduction and reprioritized R&D. In November 2022, after quarter-end, it announced an additional 23% reduction, with related severance expense expected in Q4 2022.
- Also after quarter-end, the company announced it would stop further clinical development of PBKR03 for Krabbe disease and seek strategic alternatives. It had also decided to hold MLD clinical-development advancement and stopped further advancement of its exploratory Alzheimer’s research program. These actions followed the filing’s stated focus on reducing expenses and extending runway.
- PBGM01’s Imagine-1 trial had completed dosing in two cohorts, with the final patient in the high-dose early-onset cohort expected to be dosed in Q4 2022; initial safety and biomarker data from two cohorts were expected in December 2022. PBFT02’s first patient was dosed in August 2022.
- A PBKR03 trial participant experienced grade 4 acute communicating hydrocephalus requiring shunt surgery; the filing said the event resolved on subsequent MRI and the patient was stable. This is a material safety and development consideration in light of the subsequent program discontinuation.
- Key risks include continued losses and the need for additional capital; uncertain clinical efficacy, safety and regulatory outcomes; rare-disease enrollment challenges; reliance on Penn, CROs and contract manufacturers; manufacturing capacity and supply risks; and potential delays from COVID-19. The company also disclosed long-term lease commitments and a Catalent minimum annual commitment of $10.6 million for five years beginning in November 2020.
- The filing describes a prior Regenxbio patent dispute concerning AAVhu68 and related matters; the company said a March 2022 Penn-Regenxbio letter agreement released current claims and included a covenant not to sue covering the company on specified matters. The company stated it believed this resolved the claims raised in the 2020 letter.
Most important facts for investors to verify
- Whether the stated runway into the first half of 2025 remains achievable after the November 2022 workforce reduction and program changes, and under updated spending assumptions.
- The timing, scope and cost of severance and other restructuring charges, and whether further program or workforce actions followed.
- Updated clinical plans and data for PBGM01 and PBFT02, and the implications of the serious PBKR03 adverse event and subsequent discontinuation.
- That the financial statements show a nine-month 2022 net loss of $109.1 million, while one risk-factor passage appears to call $26.7 million the nine-month loss; $26.7 million is the reported Q3 loss. Investors should verify this apparent internal inconsistency against the filed statements.
- Actual cash burn, investment liquidity and the scale of fixed commitments, including Catalent manufacturing minimums, Penn research funding and operating leases.